Oil Prices Tumble; OPEC Supplies Outstrip Demand

Oil prices dropped below $19 a barrel for the first time in nearly two weeks Tuesday, amid concern that OPEC supplies are continuing to outstrip demand.

The downward move was accelerated by nervous traders unloading contracts they had held over the weekend in anticipation that prices would remain within the $19 range, analysts said.

On the New York Mercantile Exchange, which was closed Monday for the Labor Day holiday, contracts for October delivery of West Texas Intermediate, the benchmark U.S. crude, closed at $18.94 per 42-gallon barrel, down 38 cents from Friday.

The contract last closed below $19 per barrel on Aug. 25, when it settled at $18.64.

Production Surges

Just before most oil markets closed, the Iraqi news agency reported that Iraqi warplanes hit two “large naval targets” east of Iran’s main Kharg Island terminal in the gulf. But the news came too late to have any significant effect on prices.

The United Arab Emirates’ Dubai Light--the key OPEC crude from the gulf--sank by 50 cents to $16.60 a barrel on the European spot market, where oil is sold to the highest bidder. Britain’s North Sea Brent crude nose-dived by 50 cents and closed under the $18 mark at $17.55 a barrel.

New York-based Petroleum Intelligence Weekly reported that OPEC production surged to a 12-month high of 19.8 million barrels a day in August, but that production is expected to slip in September.

The gulf states, which took advantage of the intermission in the tanker war last month, were responsible for the entire 1.1-million barrel a day jump in OPEC output from July levels, the oil journal said.

More Than World Needs

Meanwhile, the International Energy Agency, a group representing 21 Western oil-consuming nations, said in Paris on Monday that August production by the Organization of Petroleum Exporting Countries totaled 19.7 million barrels daily.

That figure, which was in line with recent estimates, is 3.1 million barrels a day more than OPEC’s official aggregate quota and about 3 million barrels a day more than the world market needs, according to some analysts.

Mike Furlan, a trader at the Dean Witter Reynolds securities firm, said that Tuesday’s report on OPEC production contributed heavily to the day’s declines.